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Stealing Trade Secrets and
Economic Economic Espionage: An Abridged
Overview of 18 U.S.C. 1831 and 1832
Charles Doyle
Senior Specialist in American Public Law
January 28, 2013
Congressional Research Service
7-5700
www.crs.gov
R42682
CRS Report for Congress
Prepared for Members and Committees of Congress
c11173008
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Stealing Trade Secrets and Economic Espionage: An Abridged Overview
Summary
Overview of 18 U.S.C. 1831 and 1832

July 25, 2014
(R42682)

Contents

Summary

Stealing a trade secret is a federal crime when the information relates to a product in interstate orforeign commerce, 18 U.S.C. 1832 (theft of trade secrets), or when the intended beneficiary is aforeign power, 18 U.S.C. 1831 (economic espionage). Section 1832 requires that the thief beaware that the misappropriation will injure the secret’'s owner to the benefit of someone else.Section 1831 requires only that the thief intend to benefit a foreign government or one of itsinstrumentalities.Section 1832 (theft) violations are punishable by imprisonment for not more than 10 years, or afine of not more than $250,000 (not more than $5 million for organizations), or both. Section1831 (espionage) violations by individuals are punishable by imprisonment for not more than 15years, or a fine of the greater of not more than $5 million, or both. Section 1831 violations byorganizations are punishable by a fine of not more than the greater of $10 million or three timesthe value of the stolen trade secret. Maximum fines for both individuals and organizations may behigher when the amount of the gain or loss associated with the offense is substantial. Any attemptor conspiracy to commit either offense carries the same penalties as the underlying crime.Offenders must also be ordered to pay restitution. Moreover, property derived from the offense orused to facilitate its commission is subject to confiscation. The sections reach violations occurringoverseas, if the offender is a United States national or if an act in furtherance of the crime iscommitted within the United States.Depending on the circumstances, misconduct captured in the two sections may be prosecutedunder other federal statutes as well. A defendant charged with stealing trade secrets is oftenindictable under the Computer Fraud and Abuse Act, the National Stolen Property Act, and/or thefederal wire fraud statute. One indicted on economic espionage charges may often be chargedwith acting as an unregistered foreign agent and on occasion with disclosing classifiedinformation or under the general espionage statutes.P.L. 112-269 set the maximum fines described above. It also instructed the United StatesSentencing Commission to examine the sufficiency of federal sentencing guidelines and policiesin the area of stealing trade secrets and economic espionage. P.L. 112-236 amended the tradesecrets prohibition of 18 U.S.C. 1832 to overcome the implications of the Court of Appeals’
Aleynikov' Aleynikov decision. That decision held that the section did not outlaw the theft of computer codedesigned to facilitate a company’'s commercial transactions, because the code did not relate to aproduct to be placed in the stream of commerce.This report is an abridged version, without the footnotes or attribution found in the longer report,CRS Report R42681, Stealing Trade Secrets and Economic Espionage: An Overview of 18 U.S.C.1831 and 1832.
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Stealing Trade Secrets and Economic Espionage: An Abridged Overview
Contents
Introduction...................................................................................................................................... 1
Stealing Trade Secrets ...................................................................................................................... 1
Economic Espionage........................................................................................................................ 3
Common Procedural Matters ........................................................................................................... 4
Related Offenses .............................................................................................................................. 5
Legislation in the 112th Congress ..................................................................................................... 5
Stealing Trade Secrets ............................................................................................................... 5
Economic Espionage ................................................................................................................. 6
Contacts
Author Contact Information............................................................................................................. 6
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Stealing Trade Secrets and Economic Espionage: An Abridged Overview
Introduction
Espionage: An Abridged Overview of 18 U.S.C. 1831 and 1832

Introduction

The Economic Espionage Act (EEA) outlaws two forms of trade secret theft: theft for the benefitof a foreign entity (economic espionage) and theft for pecuniary gain (theft of trade secrets).Under either proscription, its reach extends to theft from electronic storage. Offenders faceimprisonment for not more than 10 years in the case of trade secret theft and not more than 15years in the case of economic espionage. Individuals may incur fines of not more than the greaterof $250,000 or twice the loss or gain associated with the offense for trade secret theft and notmore than the greater of $5 million or twice the loss or gain for economic espionage.Organizations are fined more severely, up to the greater of $5 million or twice the gain or loss fortrade secret theft, and for economic espionage up to a fine of the greater of $10 million, threetimes the value of the trade secret, or twice the gain or loss associated with the offense.A court may assess the same sanctions for attempt or conspiracy to commit either offense. Asentencing court must order the defendants to pay victim restitution, and the government mayconfiscate any property that is derived from or used to facilitate either offense. The governmentmay seek to enjoin violations, but the EEA creates no explicit private cause of action. Conductthat violates the EEA’'s proscriptions may also violate other federal prohibitions, however. Some,like the Computer Fraud and Abuse Act, in addition to imposing criminal penalties, do authorizevictims to sue for damages and other forms of relief under some circumstances.Stealing Trade Secrets
ElementsElements, Attempt, and Conspiracy:: The section’'s multiple elements limit its reach. Thesection condemns:
- Whoever

- Whoever

- with intent to convert- a trade secret- related to or included in a product that is produced for or placed in interstate commerce orforeign commerce- to the economic benefit of anyone other than the owner thereof- intending or knowing that the offense will injuryinjure the owner of that trade secret- knowingly (a) steals ... , (b) without authorization copies ... downloads, uploads, alters,destroys, ... transmits ... sends, ... or conveys such information; [or] (c) receives, buys, orpossesses such information, knowing the same to have been stolen or appropriated, obtained,or converted without authorization;
or

or

Whoever attempts or conspires to do so.
WhoeverWhoever: The term “whoever”"whoever" encompasses both individuals and organizations. Thus, individualsand organizations may be guilty of the theft of trade secrets. Subsection 1832(b) confirms thisintent by establishing a special fine for “organizations”"organizations" who commit the offense. For purposes ofthe federal criminal code, an “organization”"organization" is any “"person other than an individual.”" TheDictionary Act supplies examples of the type of entities that may qualify as “persons” – “the
words ‘person’ and ‘whoever’ include"persons" – "the words 'person' and 'whoever' include corporations, companies, associations, firms, partnerships,societies, and joint stock companies, as well as individuals.”
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Stealing Trade Secrets and Economic Espionage: An Abridged Overview
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With Intent to Convert: Conversion is a common law concept which is defined as “"[t]he wrongfulpossession or disposition of another’'s property as if it were one’'s own; an act or series of acts ofwillful interference, without lawful justification, with any chattel in a manner inconsistent with
another’ another's right, whereby that other person is deprived of the use and possession of the chattel.”
" This “"intent to steal”" element, coupled with the subsequent knowledge and “"intent to injure”
" elements, would seem to ensure that a person will not be convicted of theft for the merelyinadvertent or otherwise innocent acquisition of a trade secret.Trade Secret: A trade secret is any information of value, not publicly known, which “"the ownerthereof has taken reasonable measures to keep”" secret. Whether an owner has taken reasonablemeasures to ensure the secrecy of his trade information will depend upon the circumstances of thecase. Such measures would ordinarily include limiting access to the information and notifyingemployees of its confidential nature. Inclusion within the definition of “"trade secret”" of theinstruction that the owner take “"reasonable measures”" to secure the confidentiality of theinformation does not render the statute unconstitutionally vague as applied to a defendant whoseconduct clearly falls with the statute’'s proscription.Product in Commerce: The trade secret must have an interstate or foreign commerce nexus.More specifically, it must be one “"that is related to a product or service used in or intended for use
in” in" such commerce. Congress settled upon this phrase after an appellate court held that earlierlanguage covered only theft of a trade secret related to a product that was, or was intended to be,sold or otherwise placed in the stream of commerce.Economic Benefit of Another: Someone other than the trade secret’'s owner must be the intendedbeneficiary of the theft or destruction. The thief may be, but need not be, the intended beneficiary.Moreover, a close reading of the statute argues for the proposition that no economic benefit needactually accrue; economic benefit need only be intended. Yet if no economic benefit is intended,there is no violation.Intent to Injure: The government must prove that the defendant intended to injure the trade
secret’ secret's owner or that he knew the owner would be injured. However, it need not show actualinjury. The section “"does not require the government to prove malice or evil intent, but merelythat the actor knew or was aware to a practical certainty that his conduct would cause somedisadvantage to the rightful owner.”" Again, the element addresses the defendant’'s state of mind,not reality. Nothing in the statute’'s language demands that the government prove actual injury.
KnowinglyKnowingly: The last of the section’'s three mens rea requirements demands that the defendant beaware that he is stealing, downloading, or receiving a stolen trade secret. There is some disputeover whether this requires the prosecution to prove that the defendant knew that he was stealing,downloading, or receiving proprietary information or that he knew that he was stealing,downloading, or receiving a trade secret.Stealing and the Like: A person may be guilty of the theft of a trade secret only if he “knowingly”
"knowingly" steals a trade secret, replicates a trade secret, destroys or alters a trade secret, or receives a stolentrade secret. Each of the alternative means of deprivation is defined in a separate subsection. Thefirst subsection covers not only stealing a trade secret, but also concealing it or acquiring it byfraud.Trade secrets are information and thus can be simultaneously held by an owner and a thief. Andso, the second subsection covers situations where the owner is not necessarily deprived of theinformation, but is denied control over access to it. It proscribes unauthorized copying,
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downloading, uploading, or otherwise conveying the information. ItsIt also outlaws alteration ordestruction of a trade secret. The Justice Department has argued that this second means ofmisappropriation includes instances where a faithless employee, former employee, or cyberintruder commits the trade secret to memory and subsequently acts in manner necessary to satisfythe other elements of the offense.The third subsection outlaws the knowing receipt of stolen trade secret information. Convictionrequires proof that a trade secret was stolen or converted in violation of one of the othersubsections and that the defendant knew it.
AttemptAttempt: Defendants who attempt to steal a trade secret face the same penalties as those whosucceed. Attempt consists of an intent to commit the offense and a substantial step towards theattainment of that goal. This suggests that the information which the defendant seeks to steal neednot be a trade secret, as long as he believes it is.
ConspiracyConspiracy: Defendants who conspire to steal a trade secret also face the same penalties as thosewho commit the substantive offense. “"In order to find a defendant guilty of conspiracy, theprosecution must prove ... that the defendant possessed both the intent to agree and the intent tocommit the substantive offense. In addition, the government must prove that at least oneconspirator committed an overt act, that is, took an affirmative step toward achieving the
conspiracy’ conspiracy's purpose.”" It is no defense that circumstances, unbeknownst to conspirators, rendersuccess of the scheme unattainable, as for example when the defendants plotted to stealinformation that was not in fact a trade secret.
ConsequencesConsequences: Individual offenders face imprisonment for up to 10 years and fines of up to thegreater of $250,000 or twice the amount of any gain or loss associated with the offense. The courtmay fine a convicted organization up to the greater of $5 million or twice the amount of the gainor loss associated with the offense. Both individuals and organizations face a higher maximumfine if twice the gain or loss associated with the offense exceeds the statutory maximum (i.e.,$250,000/$5 million). A sentencing court must also order the defendant to pay restitution to thevictims of the offense. Property derived from, or used to facilitate, commission of the offensemay be subject to confiscation under either civil or criminal forfeiture procedures. The AttorneyGeneral may sue for injunctive relief, but there is no explicit private cause of action.
Economic Espionage
Economic Espionage
Economic espionage and theft of trade secrets share many of the same elements. There are fourprincipal differences. The theft of trade secrets must involve the intent to benefit someone otherthan the owner. It must involve an intent to injure the owner. And, it must involve a trade secret
“ "that is related to or included in a product that is produced for or placed in interstate or foreigncommerce.”" Economic espionage, on the other hand, must involve an intent to benefit a foreignentity or at least involve the knowledge that the offense will have that result. It does not requirean intent to injure the owner. And, it applies to any trade secret, notwithstanding the absence ofany connection to interstate or foreign commerce. Finally, economic espionage is punished moreseverely. The maximum term of imprisonment is 15 years rather than 10 years, and the maximumfine for individuals is $500,000 rather than $250,000. For organizations the maximum fine is $10million rather than $5 million. As in the case of stealing trade secrets, the maximum permissiblefine may be higher if twice of the amount of the gain or loss associated with the offense exceedsthe otherwise applicable statutory maximum.
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Section 1831 condemns:
- Whoever

Whoever attempts or conspires to do so.Foreign Beneficiary: A casual reader might conclude that any foreign entity would satisfy section
1831’ 1831's foreign beneficiary element. Section 1839’'s definition of foreign agent and foreigninstrumentality, however, makes it clear that an entity can only qualify if it has a substantialconnection to a foreign government. The definition of foreign instrumentality refers to foreigngovernmental control or domination. The description of a foreign agent leaves no doubt that theindividual or entity must be the agent of a foreign government.The theft of a trade secret demands an intent to confer an economic benefit. Economic espionageis not so confined. Here, “"benefit means not only economic benefit but also reputational,strategic, or tactical benefit.”" Moreover, unlike the theft offense, economic espionage may occurwhether the defendant intends the benefit or is merely aware that it will follow as a consequenceof his action. As in the case of trade secret theft, however, the benefit need not be realized; it isenough that defendant intended to confer it.Common Procedural MattersProtective Orders: It would be self-defeating to further disclose a victim’'s trade secrets in course
the course of the prosecution of a thief. Consequently, the EEA authorizes the trial court to issue orders toprotect the confidentiality of trade secrets during the course of a prosecution and permits thegovernment to appeal its failure to do so. The government may not appeal an order to revealinformation it has already disclosed to the defendant. Nevertheless, in such instances, appellatereview of a district court’'s disclosure order may be available through a writ of mandamus.
ExtraterritorialityExtraterritoriality: The Supreme Court has said on a number of occasions that “"[i]t is alongstanding principle of American law that legislation of Congress, unless a contrary intentappears, is meant to apply only within the territorial jurisdiction of the United States”" With this inmind, Congress specifically identified the circumstances under which it intended the economicespionage and theft of trade secrets provisions to apply overseas. Either offense may beprosecuted as long as the offender is a U.S. national or an act in furtherance of the offense iscommitted within this country. The legislative history indicates that these are the onlycircumstances under which violations abroad may be prosecuted. This may mean that foreignconspirators may not be charged unless some overt act in furtherance of the scheme occurs in theUnited States. It may also preclude prosecution when trial would have been possible in theabsence of an express provision. For example, in the absence of the limiting provision, the courtswould allow prosecution of overseas offenses of foreign nationals that have an impact within the
United States.
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United States.
Prosecutorial Discretion: For five years after passage of the Economic Espionage Act, neithereconomic espionage nor trade secrets violations of its provisions could be prosecuted without theapproval of senior Justice Department officials. Prosecutors must still secure approval beforebringing charges of economic espionage, but approval is no longer necessary for the prosecutionof theft of trade secret charges.
Related Offenses
Related Offenses
Conduct that violates the Economic Espionage Act may violate other federal criminal provisionsas well. In the case of trade secrets offenses, potentially corresponding offenses include violationsof the Computer Fraud and Abuse Act, the National Stolen Property Act, and the federal wirefraud statute. The Computer Fraud and Abuse Act outlaws accessing certain computers orcomputer systems without authorization or in excess of authorization, with the intent to defraud.The National Stolen Property Act outlaws the interstate transportation of tangible stolen propertyor the knowing receipt of such property. The federal wire fraud statute outlaws the use of wirecommunications in execution of a scheme to defraud.In addition, in the case of economic espionage violations, a defendant may be charged under thegeneral espionage laws and with, the espionage component of the computer fraud statute, or for failure to register as the agent of a foreign power. Foreignagents, other than diplomatic personnel, must register with the Attorney General; failure to do sois generally a felony. The Computer Fraud and Abuse Act outlaws computer intrusions launched for espionage purposes. The general espionage laws are only likely to be triggered if the trade secretinformation is also classified information or is national defense information.
Legislation in the 112th Congress
Amendments in the 112th Congress
Congress amended the EEA twice during the 112th112th Congress. The Theft of Trade SecretsClarification Act of 2012 clarified the trade secrets jurisdictional element. The Foreign andEconomic Espionage Act of 2012 increased the maximum fine levels for economic espionage. Italso directed the United States Sentencing Commission to reexamine its treatment of economicespionage and the overseas transmission of stolen trade secrets.Stealing Trade SecretsOn November 27, 2012, Senator Leahy introduced, and the Senate passed by unanimous consent,the Theft of Trade Secrets Clarification Act (S. 3642). The proposal reworded the jurisdictionalelement of the trade secret provision to cover secrets relating to products or services used orintended for use in interstate or foreign commerce. Senator Leahy explained that:A recent decision of the Second Circuit in United States v. Aleynikov casts doubt on thereach of the statute. A jury in that case found the defendant guilty of stealing computer codefrom his employer. The court overturned the conviction, holding among other things that thetrade secret did not meet the interstate commerce prong of the statute, even though thedefendant had copied the stolen code from his office in New York to a server in Germany;downloaded the code to his home computer in New Jersey; then flew to his new job inIllinois with the stolen source code in his possession; and the code was used in interstatecommerce.The court held that the Economic Espionage Act provision applies only to trade secretsthat are part of a product that is produced to be placed in interstate commerce. Because the
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company’ company's proprietary software was neither placed in interstate commerce nor produced tobe placed in interstate commerce, the law did not apply – even though the stolen source codewas part of the financial trading system that was used in interstate commerce every day.The House passed the measure shortly thereafter under suspension of the rules, and the Presidentsigned it into law on December 28, 2012, P.L. 112-236.
Economic Espionage
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Economic Espionage
On August 1, 2012, the House passed the Foreign and Economic Espionage Penalty EnhancementAct of 2012 (H.R. 6029), under suspension of the rules. The Senate Judiciary Committee hadpreviously reported favorably a similar proposal as the Economic Espionage PenaltyEnhancement Act (S. 678). Unlike the Senate bill, the House legislation would have increasedthe penalties for violations of 18 U.S.C. 1831 (economic espionage). Under the House-passedproposal the maximum term of imprisonment would have increased from not more than 15 yearsto not more than 20 years. Section 1831 previously punished individual defendants with a fine ofnot more than the greater of $500,000 or twice the loss or gain associated with the offense andpunished organizational defendants with a fine of not more than the greater of $10 million ortwice the loss or gain. The House bill would have amended it to permit a fine for an offendingindividual of not more than the greater of $5 million or twice the loss or gain and to permit a finefor an offending organization of not more than the greater of $10 million, three times the value ofthe stolen trade secret, or twice the gain or loss associated with the offense.Neither proposal would have changed the maximum terms of imprisonment (not more than 10years) or the maximum fines for trade secret violations ($250,000 for individuals; $5 million fororganizations). Both would have instructed the United States Sentencing Commission toreexamine the treatment of economic espionage and overseas transmission of stolen trade secretsunder the Commission’'s sentencing guidelines.The legislation is a reaction to reports of increased foreign predatory action and of “"sensitive USeconomic information and technology ... targeted by the intelligence services, private sectorcompanies, academic and research institutions, and citizens of dozens of countries.”
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The Senate agreed to the House-passed proposal, but not before removing the provision thatwould have increased the length of the maximum prison term. The House agreed to the Senateamendment under suspension of the rules. The President signed the proposal on January 14,2013, P.L. 112-269.
P.L. 112-269.
Author Contact Information
Charles Doyle
Senior Specialist in American Public Law
cdoyle@crs.loc.gov, 7-6968
Congressional Research Service
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